Issue XXX: The Nonprofit Hospital Scam

30 Jul

Which is worse: being openly all about the money and bragging about it or pretending to be above such things while raking in the tall dollars anyway?  Open greed or greed with dignified poise?  The rude millions or the graceful aristocratic fortune?  The answer, dear readers, lies with the uniquely American institution of obscenely profitable “nonprofit” hospitals.

If Wall Street gambles the world economy with taxpayer backing, nonprofit hospitals receive billions of federal, state, and local tax breaks in order to provide charity care that they simply do not provide.  Examples abound:

  • Methodist Hospital – The most prestigious hospital in Texas was sued by Jim Mattox, the populist state attorney general, for spending peanuts on indigent care (1% of gross revenues, 6.8% of net revenues) in the 1980s.  The numbers?  $5 billion in revenue over four years, $250 million in profits, $330 million in cash, and yet only $17 million in indigent care.  They must have spent their property tax break on hotels, hunting lodges, real estate, valets, and restaurants .
  • M.D. Anderson – Flip-flopping between first and second place for the best cancer center in the world, the M.D. Anderson Cancer Clinic is actually part of the University of Texas, a public university system.  Recently testifying before Congress was a woman from Lake Jackson who was told turn over $60,000 to be admitted to the hospital after she gave them a check for $45,000 for her lab tests.  And she had insurance.  As the Senate Finance chairman in Austin remarked, “M.D. Anderson is public institution that doesn’t seem to see public patients.”  M.D. Anderson responded that you can’t “compare” M.D. Anderson to local Texas public hospitals in terms of their indigent load.  They are after all, only the second richest cancer charity in America the president muttered.  Perhaps they should be compared to these out of state gems.
  • Northwestern – Northwestern built a new campus with marble lobbies for, you know, one billion dollars.  One thing they forgot to pay for was indigent care which was only $20.8 million in 2006 (compared to the CEO’s salary of $16.8 million and an annual tax break of $37.5 million).  Maybe the Scrooges should dig a bit deeper into their portfolio of $1.82 billion, enough to run for an entire year without a penny of revenue.
  • University of Chicago – An “elite” institution (i.e. we treat rich people and research their diseases) in the poor African-American South Side of Chicago made the papers for its ER’s callous disregard of a child whose lip was bitten off by a dog because he only had Medicaid.  The American College of Emergency Physicians rebuked the institution for its systematic non-treatment of the uninsured and called for a congressional investigation.  An even dirtier secret is that the Urban Health Initiative to keep people out of the ER was cooked up by Michelle Obama and marketed by David Axelrod, Barack Obama’s chief strategist in their days back in Chicago.  The numbers?  $1 billion in revenue, $38 million in tax breaks, and yet only $8.7 million of charity care.  Northwestern (11,000 charity outpatients and 1,000 charity inpatients) looks like the Gates Foundation compared to the University of Chicago (63 charity outpatients, 312 inpatients).
  • Pittsburgh – Nonprofit institutions, including the very profitable University of Pittsburgh Medical Center, cannibalize the tax base of the city by buying up profitable businesses and restaurants that are then exempt from local taxes.  The city still has to fund fire, police, electrical, and sewer services which raises taxes for everyone else (who then move outside the city limits becauses taxes are too high).  Of course, the hospital CEO makes $2.4 million while a struggling city dies a little bit more.

With stats like these, is it any wonder that 77% of nonprofit hospitals are profitable while only 61% of for-profit hospitals make money?  Perhaps it is best to leave the last word from the bastards themselves:

Methodist Hospital of Houston disputes the charges made by the Texas Attorney General, Jim Mattox. “We are a nonprofit hospital, but not a charity hospital,” said Larry L. Mathis, the hospital’s president. “We do not set out specifically to extend our services to the poor. We were founded 71 years ago as a teaching and research center, and we believe those activities are charitable because they benefit everyone.”

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7 Responses to “Issue XXX: The Nonprofit Hospital Scam”

  1. Benn Fronk July 30, 2009 at 5:00 pm #

    Excellent work with this post. You’ve brought in a lot of good points backed with numbers. The last quote is telling.

  2. Nabeel July 30, 2009 at 5:10 pm #

    I’m fairly certain the ‘non-profit’ title is most striking among hospitals, a historically unbiased institution. However, I’m fairly certain that you could find much of these same disregards of law & humanity with any ‘non-profit’ institution with enough profit (if that makes any sense…i.e. places of higher educations, some businesses, even churches). I would much rather be lied to my face than charaded into believing something that’s entirely based on principles of fuzzy math

  3. bhatany July 30, 2009 at 8:15 pm #

    Nabeel, are you saying you RATHER have these hospitals declare themselves for profit or they should continue the nonprofit charade?

    Higher education privatization is an issue that also fascinates me; these teaching hospitals are also educational institutions as well, so it was indirectly about higher education as well. Maybe I’ll make that my thesis in London.

    I never bought the line that “money is the root of all evil,” and it is always inherently corrupting. I always found that to be too Biblical and cynical for my tastes. I guess I was wrong.

  4. Deena August 13, 2009 at 11:29 pm #

    Where exactly do you get your facts and figures from?? Great blog. I really never thought of hospitals as money hungry businesses with stingy CEOs…go figure.

  5. Brett Muhlhan November 23, 2009 at 9:47 pm #

    Help me understand something. In fact, why don’t you wake your ass up tomorrow morning at 5:30 a.m. and meet me @ the the University of Chicago Hospital where I will show you 3 people who cannot afford a can of SPAGHETTI-O’S, much less health insurance that I will be treating. After I treat them for their “free heart transplants” (I believe free means we accept no money for their surgery, hence no profit.) I am sure some how we get paid since I get paid an hourly wage to give them mani’s & pedi’s , but to my knowledge the poor patient pays nothing. Then we can walk down the hall to the person who is on dialysis who cannot pay to have her own home/apartment/condo/shed/car/box with flooring, you name it. Lets ask her how we refused to provide her with Beverly Hills type treatment. I actually bought her a coffee, maybe you always buy coffees for rich people too. She cannot afford a mocha frappachino latte. But luckily we turned her away after hosting her for 5 months and healing her. Nothing like working my ass off, you get pissed about one kid with a lip problem, and we are satan. Nice job. Keep blogging away as I am sure you are that “weird person” I avoid in line at grocery stores. You probably, no 100% you do, that is sit back and blame society for your problems. Would love to chat, but I have to get up in 7 hours and go take care of Seal, Oprah and Bill Gates, because they all got papercuts on their fingers from counting their money and we will treat them since they are worth 10 bajillion dollars (wait you have to laugh like Dr. Evil when you read that, it’s better). Enjoy life behind your surreal monitor and do not forget to ask santa for a gift since you are dilusional. Maybe he and the Easter bunny can collaborate on your own holiday. Might as well get U 0f C (A research hospital) to successfully fund a program to mate a rabit with an old man, then you have your holiday mascot. Peter Hoppincklaus.

    Happy Holidays Schmuck!

    Sincerely,

    Someone who gets it……

  6. bhatany November 25, 2009 at 1:35 pm #

    Dear Brett,
    Thanks for the commentary. As for whether or not I have waken up at 5:30AM to round on indigent patients, the answer is that I have because I am a medical student at a state hospital where only 15% of our patients are on private insurance. I’ve also rounded in our prison hospital. I plan to do residency as well at a program with a county or state hospital treating indigent patients. Do you have the patient figures for the University of Chicago? Because I would love to be proven wrong about how many private patients they see as a whole. Assuming you are a resident or med student, I’ll just point out that everyone knows VIPs get seen by attending professors, not residents or med students.

    More points will follow.

  7. bhatany November 25, 2009 at 1:55 pm #

    1) Where does prestige come from? – In American academic medicine the answer is clear. Research excellence (based on NIH funding) not clinical excellence. This is well known internationally. Is this in line with what we really value in society? If people knew that the most prestigious schools have big names not because they necessarily have the best clinicians but by bench research, would that change the way they view doctors from less prominent schools?

    2) Are the tax breaks justified? – Health care in America is a business. I don’t agree with that philosophically, but that is the present case. If nonprofit hospitals are supposed to provide a social benefit in exchange for tax-exempt status, what should be done when they pursue private patients and behave no differently than for-profit hospitals. For-profit hospitals DO see indigent patients without such tax breaks including one mentioned in the Chicago Tribune on the South Side. Why does U of C deserve tax-exempt status if the numbers (assuming they are correct) show only nominal amounts of charity care? Perhaps we limit or define what tax-exempt status means in a hospital setting.

    3) Many nonprofit hospitals are cash cows – Anyone with eyes knows this. Balance sheets don’t lie. Last week, I spoke an economics student who worked at Univ. of Chicago who told me that whenever the hospital made a big profit, they would hide it by just paying the administrators more money (increasing expenses) to make it look less profitable than it is. Without inflation of hospital administrator salaries, the profit figures would look even bigger. Last night, an ex-pharm rep told me that Denver Children’s Hospital would skimp on neonatal treatments to keep more of their DRG payments (in this case by not giving the monoclonal antibodies that were covered under the DRG lump sum). I didn’t make this stuff up.
    In business competition, nonprofit hospitals can use tax benefits to demolish for-profit competitors by investing in capital. I have heard complaints from private hospital administrators about this unfair competition.

    4) Institution versus individual – Just because you, Brett, work for a questionable institution it doesn’t make you a bad person. Clearly you do a good job and treat your patients right. That doesn’t preclude the fact that you aren’t in control of what patients end up in your service. That’s a policy and administrator issue. Nothing in my post is to insult the very good work that nurses and doctors at these hospitals do. I question the larger institutions they work for and whether they have the right philosophy and policies behind them.

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